Tesla Motors Inc (TSLA) Earnings Analysis: Why Did The Stock Plunge?

Tesla Motors Inc (NASDAQ:TSLA) released its earnings numbers for the three months through September this afternoon. The company’s shares dropped quickly after the numbers were released. Tesla showed that it sold 5,500 cars in the period and earned an adjusted 12 cents per share. The company showed revenue of $603 million for the three months.

The company’s poor performance on the after-market appears to stem from worse-than-expected performance of core Tesla business rather than reaction to the headline numbers. Tesla Motors Inc (NASDAQ:TSLA) predicted that it would sell 5,000 cars during the period, but expectations appear to have run ahead of the company’s own estimates.

Tesla earnings

In the minutes after the release of the Tesla Motors Inc (NASDAQ:TSLA) report the company’s stock was volatile, but there was a general negative trend. At time of writing the stock was down by more than 10%.

Tesla Motors Inc (NASDAQ:TSLA) as a full business performed much better than the company’s electric car core earner, but the company’s earnings report put that business out front. Gross margin excluding electric vehicle credits hit its highest level ever at 21% in the third quarter. Gross margin across the entire business came in at 24%.

Outlook for the full year was in line with what the company has been guiding for several months. Tesla Motors Inc (NASDAQ:TSLA) is looking for deliveries of 21,500 cars for the full year and expects its cash flow to be break even for the twelve months. The company still expects to hit gross margin of 25% without the inclusion of tax credits.

Tesla stock drop

There appear to be a couple of reasons behind the drop in Tesla Motors Inc (NASDAQ:TSLA) stock this afternoon. The company certainly failed to meet the expectations in its core car business during the period. The market has put a lot of weight on Tesla Motors; the rapid rise in the value of the company in recent days is probably partly responsible for the loss.

Shareholders in Tesla Motors Inc (NASDAQ:TSLA) have been warned multiple times that the company’s value is not based on anything solid. The CEO of the company has taken it upon himself to warn shareholders more than once. Today’s loss of value means nothing for the long term health of Tesla. Investors who believe in the company’s business will not have been shaken by the earnings report or the loss in the value of the company.